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The dollar dropped to four-month lows against its Japanese counterpart Wednesday, feeling the fallout of risk-aversion from a deepening U.S. stock market retreat.

Meanwhile, the euro paused its advance against the dollar but clung to nearly seven-week highs.

Against its Japanese counterpart, the dollar USDJPY, -0.35% was off 0.4% at ¬•111.670 after earlier plumbing ¬•111.430, its lowest since Nov. 28.
‚ÄúThe Japanese yen outperformed as stocks slumped ... offering a lift to the standby anti-risk currency,‚ÄĚ said Ilya Spivak, currency analyst at DailyFX. ‚ÄúA near-empty European data docket and a decidedly underwhelming one in the U.S. may keep risk trends at the forefront.‚ÄĚ

Wall Street stocks were poised to build on the prior day‚Äôs sharp slump Wednesday, as investors grew concerned that the Trump administration will fail to deliver on its pro-business promises. On Tuesday, all three major indexes SPX, -1.24% DJIA, -1.14% COMP, -1.83% posted their largest one-day point drop since September last year.

The stock selloff was driving investors into bonds, at least in the short term, tugging down yields and making dollar-priced assets less attractive to investors using other currencies. The benchmark 10-year Treasury note yield TMUBMUSD10Y, -0.14% extended its decline to 2.41%, its lowest in about three weeks.

Read: A history-setting trading streak for Dow, S&P 500 just came to a screeching halt

‚ÄúA few weeks ago, Trump pledged to deliver a comprehensive tax plan, but only after he repealed and replaced the Affordable Care Act (Obamacare). However, the latest signals from Congress suggest that there is widespread opposition to the proposed replacement of Obamacare among both Democrats and Republicans,‚ÄĚ said Charalambos Pissouros, senior analyst with IronFX.

‚ÄúIf Trump loses [the impending vote for quick health-care reform], we expect to see similar market reactions as uncertainty around U.S. fiscal policy heightens,‚ÄĚ he said. ‚ÄúNamely, we expect further pullback in equities as well as increased flows into safe-haven assets.‚ÄĚ

A vote in the U.S. House of Representatives on the Republican Party‚Äôs health care plan was tentatively set for Thursday.

DXY declines: More broadly, the ICE Dollar Index DXY, +0.10% which measures the greenback against a half-dozen rivals, traded at 99.85 early Wednesday, near the 99.75 level hit late Tuesday. The index hit a 1-1/2-month low of 99.642 at one point early Wednesday.

The dollar index has given up nearly all of the gains since the Nov 8. U.S. presidential election. It had cleared a multiyear high of 102 in early March. Dollar disappointment started to take hold last week, when the Federal Reserve hiked interest rates but did not signal a faster pace of future tightening that many analysts believed had been priced into the high-flying dollar.

Meanwhile, the euro EURUSD, -0.1480% was buying $1.0795 compared with $1.0812 late Tuesday in New York. The euro had started Wednesday action near the late-Tuesday level hit after pro-euro centrist candidate Emmanuel Macron performed well in France‚Äôs first televised presidential debate.

The pound GBPUSD, -0.2003% fell to $1.2463 ahead of a Wednesday vote by Scottish lawmakers on whether a second independence referendum should be held. Scotland‚Äôs First Minister Nicola Sturgeon, citing concerns about Scotland‚Äôs economic future post-Brexit, is pushing for another vote on whether the country should leave the U.K.

In 2014, Scots by 55% to 45% voted to remain part of the U.K. alongside England, Wales and Northern Ireland.